All The Fintech - 1.2.18 - 13 thoughts on 2017

Happy New Year everyone! I work with a lot of different companies across the fintech spectrum in my current role at Plaid (ps we’re hiring for almost everything). For my first post of 2018, I wanted to take a step back and give some thoughts on what I saw happen across fintech in 2017.

1) Rise of mainstream investment (but not quite usage adoption) of cryptocurrencies - Coinbase was at one point, the most downloaded app in the App Store. As result, prices shot up across the space dramatically, case in point.

2) Launch of the ICO - Initial coin offerings raised over $4BN in 2017 as an alternative way to kickstart company/protocol funding. Will see much more regulation here in 2018.

3) Large bank fintech M&A - More sizeable fintech investment and acquisition from some of the larger banks & FI’s in the US, typically for companies that were struggling to find further growth opportunities. Increasing focus on “fintech” and “digital” as a strategic priority. Ex: Chase acquiring WePay and investing in Bill.com, Navient acquiring Earnest, Goldman Sachs acquiring Bond Street, etc

8) Rise of brokerage as mainstream - Robinhood, Stash, and Acorns were some of the most successful fintech companies in 2017 in regards to user downloads (see Matt’s post below in Fintech apps). Crypto craze + record stock market highs drove increased interest in apps that make investing easy & cheap to understand and execute.

9) (Relatively) Hands off approach from US regulatory bodies towards fintech - I was expecting to see a much more aggressive clamp down from the SEC in regards to ICOs, but seems like it’s more of a wait, get educated, and see approach (which I believe is overall net positive). Ex: OCC putting forward proposal for fintech banking charters in Dec, CFPB non-action for Upstart’s use of alternative data (prior to the CFPB getting a bit declawed), continued engagement across regulators with various fintech companies

10) Remittances heating up - Transferwise, WorldRemit, Remitly all raised large rounds in 2017 to continue to deliver more offerings to tackle the $436B remittance market. A lot of new cryptocurrencies also popped up, trying to claim some market share.

12) China leading the way to fintech IPOs - China seemed to be on a whole different level in regards to 2017 fintech IPO and M&A activity, with fintech “reshaping the way Chinese consumers pay, borrow and invest”. That being said, Chinese fintech companies that IPO'ed this year overall performed poorly. Most were lending focused “companies that grew quickly in recent years by making loans to China’s giant and increasingly tech-savvy population.” Increase regulation might dampen lending prospects, but still a ton of cash in reserve from the average middle class Chinese family. (https://www.wsj.com/articles/year-of-the-turkey-for-chinese-ipos-in-the-u-s-1513512000)

13) Mortgage is back - A ton of VC funding went into streamlining various aspects of the mortage process from title insurance, origination, payments, etc. Starting to also see more activity from GSE’s such as Fannie Mae & Freddie Mac who want to stay ahead of the curb. Alternative mortgage lenders now account for almost half (45%) of all home loans, according to the Federal Reserve — the largest share in 20 years. Ex: Blend raising $100MM from Greylock, Fannie Mae’s Day 1 Certainty program, Quicken’s Rocket Mortgage launch, growth of SoFi/LoanDepot/Lenda.

Next week, I’ll give some thoughts on where I think 2018 might go, but in the meantime, a quick catch-up on the so what. As always, a lot of activity with crypto so I put all the crypto articles towards the bottom :)

Earlier this year the “fintechs” hit a massive milestone, one that very few people noticed but which must certainly be keeping senior execs at banks, credit card companies and other institutions up at night. In June of 2017, for the first time in history, the top 10 publicly traded U.S. fintechs surpassed $100 billion in total market capitalization.

Feeds into my believe that it’s still early stages for fintech in the US.

Over half of US consumers still do not download any new apps in a given month, according to data from comScore. As we approach the end of 2017, I thought it’d be interesting to take a quick scan of the top 100 US ‘Finance’ apps in the App Store to see what’s changed in a year.

Great, quick analysis by Matthew Wong of CBInsights on the most popular fintech applications of 2016 vs 2017 by downloads.

Just three months after Mike Cagney’s board ousted him amid allegations of sexual harassment, the founder of SoFi is already plotting his comeback.Cagney has been approaching investors in recent weeks about a new fintech startup with a plan to raise about $25 million, according to multiple people familiar with his outreach.

The IRS Data Verification Modernization Act of 2017, recently introduced in Congress by Rep. Patrick McHenry (R-NC) and Sen. Cory Booker (D-NJ), would set up an application programming interface (API) at the IRS. This API would turn a cumbersome, manual process into an automated one. An API would allow the agency to provide your transcripts the instant you give your authorization.

Interesting idea, although if it actually passes I think it’ll be years before we see a fully functional API by the IRS that can handle any scale.

Passport, company that’s managing much of the technical aspects of how people pay to use public transportation resources in cities like London, Miami and Los Angeles, has just raised $43 million.The money, from Bain Capital Ventures, will go to help the company expand its payment and transaction services nationally and internationally as cities and states wrestle with how new mobility technologies will transform vast portions of urban infrastructure and government income.

One of the biggest names in Silicon Valley is placing a moonshot bet on bitcoin. Founders Fund, the venture-capital firm co-founded by Peter Thiel, has amassed hundreds of millions of dollars of the volatile cryptocurrency, people familiar with the matter said.

I wanted to share some of my thoughts from this year’s exercise, since so many of them had to do with crypto. Some of these might be helpful to you, others might offend you, still others might seem stupid, simple, or obvious.

Some interesting thesis for thought on where crypto might go next year. Ryan Selkis has been involved with crypto for a bit and while I don’t necessarily agree with everything, always thought provoking.

Goldman Sachs Group Inc. is setting up a trading desk to make markets in digital currencies such as bitcoin, according to people with knowledge of the strategy. The bank aims to get the business running by the end of June, if not earlier, two of the people said. Another said it’s still trying to work out security issues as well as how it would hold, or custody, the assets.